Dax Technical Analysis 15/8/2017

Dax Outlook

We remain bearish below 12335 on the wider timeframe. Yesterday we had a mini ‘relief rally’ which was driven mainly by easing tensions in NK. We are still seeing a Gold rally and a move towards risk off sentiment which supports the bearish case for equities. The relief rally is approaching resistance, so we could be ready to attempt short setups soon.

Regarding event risk this week, tomorrow, the FOMC will issue minutes from its July meeting, this may hold some clues on when the next hike will be. There is also the Euro GDP data. These releases can occasionally spill over into the indices.

Bearish Strategy

Sell near resistance and take profits near support. Assuming that the 12335 trend-defining level holds, the bearish strategies are more likely to play out. We like a rejection from High Volume Node on the composite profile. HVN2. If this move takes off, then retracements back to VWAP can offer additional entries.

Bullish Strategy

Buy near support and take profits near resistance. Although the overall trend (bearish) is still intact, we have seen a bullish channel (relief rally) form from the lows on the 10/11th. The current line in the sand for bulls is around 12150. If that level goes, then the channel is broken and we’ve made a lower low. But if it holds and buyers can defend it, then there’s an opportunity for a long with good reward to risk (despite the probability of success is very low).

My outlook today was to attempt to short at or near resistance, assuming that the wider bearish trend was going to prevail. I may need to have a few attempts at it today. This is the first. We are currently directly underneath a large value area from the previous weeks trading data, we have just seen a spike at 8 am followed by the signs of a ‘blow off reversal’.

If the pattern plays out, we can move our stop loss to break even and see how many points we can take off. The concern is whether the stop loss is too tight.

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A nice reaction to the top of the band here and we have cut through all the daily pivot support levels, trading between the S2 and S3 as the US session begins to take over. Let’s see what happens, I would be surprised if we continue to slide lower for the rest of the session, but the Dax can often surprise. I would expect the daily S3 to hold price if we do manage to fall that far during the day offering an intraday opportunity to buy.

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